What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-26 compared with 2021-07-28 · 102 added, 114 removed, 338 unchanged (39% of the section changed)

8 unchanged sentences

• Conditions in the industries in which our Machine Clothing and Albany Engineered Composites segments compete, along with the general risks associated with macroeconomic conditions, including continuation of COVID-19 pandemic effects for an extended period of time;

• In both the Machine Clothing and Albany Engineered Composites segments, increasing labor, raw material, energy, and logistic costs due to supply chain constraints and inflationary pressures

• In the Machine Clothing segment, greater than anticipated declines in the demand for publication grades of paper, or lower than anticipated growth in other paper grades;

9 unchanged sentences

The MC segment is the Company’s long-established core business and primary generator of cash.

While it has been negatively impacted by well-documented declines in publication grades in the Company’s traditional markets, there has been some offsetting effect due to growth in demand for packaging and tissue grades, as well as the expansion of paper consumption and production in Asia and South America.

We feel we are well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets,

and continued strength in new product development, technical product support, and manufacturing technology.

expansion of paper consumption and production in Asia and South America.

We feel we are well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology.

Some of the markets in which our products are sold are expected to have low levels of growth and we face pricing pressures in all markets.

12 unchanged sentences

The following table summarizes our Net sales by business segment:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands, except percentages)

14 unchanged sentences

Three month comparison

• Changes in currency translation rates had the effect of increasing Net sales by $6.4 million during the second quarter of 2021, as compared to 2020, principally due to stronger Euro and Chinese Yuan Renminbi in 2021.

• Changes in currency translation rates had the effect of increasing Net sales by $1.8 million during the third quarter of 2021, as compared to 2020, principally due to stronger Euro and Chinese Yuan Renminbi in 2021.

• Excluding the effect of changes in currency translation rates:

• Net sales increased 8.8% compared to the same period in 2020.

• Net sales in MC increased 0.8% compared to the second quarter of 2020, principally due to growth in sales for packaging grades and engineered fabrics, partially offset by declines in other grades.

• Net sales in AEC increased 1.3%, mainly due to an increase in sales for the LEAP and CH-53K programs, partially offset by a decline in sales on the Boeing 787 program.

Six month comparison

• Changes in currency translation rates had the effect of increasing Net sales by $12.4 million during the first six months of 2021, as compared to 2020, principally due to stronger Euro and Chinese Yuan Renminbi in 2021.

• Net sales in MC increased 9.9% compared to the third quarter of 2020, due to growth in all major grades of product, led by engineered fabric and packaging grades.

• Net sales in AEC increased 6.7%, mainly due to growth on LEAP and CH-53K programs, partially offset by a decline in sales for the Boeing 787 and F-35 platforms.

Nine month comparison

• Changes in currency translation rates had the effect of increasing Net sales by $14.2 million during the first nine months of 2021, as compared to 2020, mainly due to stronger Euro and Chinese Yuan Renminbi in 2021.

• Excluding the effect of changes in currency translation rates:

• Net sales decreased 3.7% compared to the same period in 2020.

• Net sales in MC increased 2.7% compared to the first six months of 2020, primarily due to growth in sales for packaging grades and Engineered Fabrics, partially offset by declines in other grades.

• Net sales in AEC decreased 14.7%, primarily due to declines in sales for the Boeing 787 program.

• Net sales increased 0.2% compared to the same period in 2020.

• Net sales in MC increased 5.1% compared to the same period in 2020, primarily due to growth in engineered fabric and packaging grades, offset by a decline in publication grades.

• Net sales in AEC decreased 8.3%, primarily due to declines in sales for the Boeing 787 program, partially offset by growth on the LEAP program.

The following table summarizes Gross profit by business segment:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands, except percentages)

7 unchanged sentences

Three month comparison

The decrease in second quarter 2021 Gross profit, as compared to the same period in 2020, was due to a decline in AEC Gross profit, partially offset by higher Gross profit in MC .

Third quarter 2021 gross profit increased 5.4% compared to that for the same period in 2020.

Gross profit as a percentage of sales:

• Decreased from 54.5% in 2020 to 52.9% in 2021 in MC, due to higher input and fixed costs, partially offset by improved absorption.

• Decreased from 26.7% in 2020 to 23.0% in 2021 in AEC, principally due to a smaller impact from changes in the estimated profitability of long-term contracts, which increased Gross profit by $4.3 million for the second quarter of 2021, compared to an increase of $7.4 million for the second quarter of 2020.

Six month comparison

Gross Profit for the first half of 2021 was slightly lower than the same period in 2020.

• Was flat at 51.5% in MC.

• Decreased from 21.6% in 2020 to 16.1% in 2021 in AEC, driven by a smaller impact from changes in the estimated profitability of long-term contracts, lower fixed cost absorption, and the effect of sharing with our customer base a portion of the AMJP grant received during the quarter.

We recognized $2.1 million net favorable change in the estimated profitability of long-term contracts during for the third quarter of 2021, compared to a $3.5 million net favorable impact during the same period in 2020.

Nine month comparison

Gross profit for the third quarter of 2021 was effectively flat compared to that for the same period in 2020.

Gross profit as a percentage of sales:

• Decreased from 53.9% in 2020 to 52.2% in 2021 in MC, due to an increase in production costs and lower cost absorption.

• Decreased from 21.1% in 2020 to 19.7% in 2021 in AEC, driven by changes in the estimated profitability of long-term contracts, which increased Gross profit by $3.7 million versus $6.4 million in the first half of 2021 and 2020, respectively.

• Decreased from 53.1% in 2020 to 52.0% in 2021 in MC, due to higher production costs, offset by improved absorption.

• Decreased from 21.2% in 2020 to 18.5% in 2021 in AEC, driven by unfavorable shift in program revenue mix.

Selling, Technical, General, and Research (STG&R)

Selling, Technical, General and Research (STG&R) expenses include selling, general, administrative, technical and research expenses.

The following table summarizes STG&R expenses by business segment:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands, except percentages)

7 unchanged sentences

Three month comparison

The overall increase in STG&R expenses in the second quarter of 2021, compared to the same period in 2020, was driven by higher incentive compensation and travel expense, as well as research and development spending.

Additionally, revaluation of nonfunctional currency assets and liabilities in Machine Clothing resulted in a second-quarter loss of $1.9 million in 2021, compared to a loss of $1.1 million for the same period in 2020.

Six month comparison

The overall increase in STG&R expenses in the first six months of 2021, compared to the same period in 2020, was due to the net effect of the following:

• Revaluation of nonfunctional currency assets and liabilities in Machine Clothing, which resulted in a loss of $1.4 million in 2021, compared to a gain of $2.6 million for the first six months of 2020

The overall decrease in STG&R expenses in the third quarter of 2021, compared to the same period in 2020, was primarily due to foreign currency revaluation gains as compared to a foreign currency revaluation losses in the same quarter of last year, offset by higher travel and R&D expenses.

Nine month comparison

The overall increase in STG&R expenses in the third quarter of 2021, compared to the same period in 2020, was due to the net effect of the following:

• Revaluation of nonfunctional currency assets and liabilities in Machine Clothing resulted in a gain of $0.2 million in 2021, compared to a gain of $1.3 million in 2020.

• Former CEO termination costs of $2.7 million were recorded in Corporate expenses during the first quarter of 2020.

1 unchanged sentence

Restructuring Expense, net

In addition to the items discussed above affecting Gross profit and STG&R expenses, Operating income was minimally affected by restructuring costs in the first six months of 2021, but totaled $3.5 million for the same period in 2020.

In addition to the items discussed above affecting gross profit and STG&R expenses, operating income was minimally affected by restructuring costs during the year-to-date period ended September 30, 2021, but totaled $4.2 million for the same period in 2020.

The following table summarizes Restructuring expenses, net by business segment:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

3 unchanged sentences

Total $ 187 $ 710 $ 230 $ 4,189

Machine Clothing restructuring charges or credits in both years mainly related to discontinued operations at its production facility in Sélestat, France, announced in 2017.

Machine Clothing restructuring charges in both years are mainly related to discontinued operations at its production facility in Sélestat, France, announced in 2017.

The restructuring program was driven by the Company’s need to balance manufacturing capacity with demand.

2 unchanged sentences

The following table summarizes operating income/(loss) by business segment:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Other Earnings Items

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

Interest expense, net $ 3,734 $ 2,242 $ 11,521 $ 10,042

AMJP grant (see Note 1) (5,832) — (5,832) —

Other expense/(income), net 2,753 (2,745) 4,215 13,915

2 unchanged sentences

Interest Expense, net

Year-to-date 2021 Interest expense, net, was lower as compared to 2020, due to lower average debt outstanding.

See the Capital Resources section for further discussion of borrowings and interest rates.

Interest expense, net was higher during the quarter and year-to-date ended September 30, 2021, compared to the same periods in 2020, primarily as a result of the following.

During 2020, the Company successfully resolved its claim for a rebate of foreign sales tax paid in previous years, reducing interest expense for the year-to-date ended September 30, 2020 by $0.9 million.

In addition, the Company completed amortizing its swap buyouts during the first quarter of 2021, eliminating interest income amortization of $0.6 million.

Other (income)/expense, net

Three and Six month comparison

Other (income)/expense net included losses related to the revaluation of nonfunctional-currency balances of $0.3 million for the first six months of 2021, compared to losses of $14.9 million for the first six months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary.

Other (income)/expense net included losses related to the revaluation of nonfunctional-currency balances of $0.8 million for the first nine months of 2021, compared to losses of $14.7 million for the first nine months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary.

As a result of changes in business conditions that occurred in the first quarter of 2020, loan repayments on that intercompany loan are not expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects are recorded in Other comprehensive income.

5 unchanged sentences

From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges.

Three and six month comparison

The Company’s effective tax rates for the second quarter of 2021 and 2020 were 30.0% and 32.1%, respectively, and for the first half of 2021 and 2020, were 28.5% and 41.0%, respectively.

Three and nine month comparison

The Company’s effective tax rates for the third quarter of 2021 and 2020 were 29.4% and 24.7%, respectively, and for the nine months ended September 30, 2021 and 2020, were 28.8% and 35.0%, respectively.

The tax rate is affected by recurring items, such as the income tax rate in the U.S.

2 unchanged sentences

tax costs on foreign earnings, and by discrete items that may occur in any given year but are not consistent from year to year.

The decrease in the Q2 2021 income tax rate from continuing operations, excluding discrete items, was primarily driven by a decrease in losses in a foreign jurisdiction that were excluded in calculating the quarterly income tax provision.

The effective tax rate for the six months ended June 30, 2020 was significantly affected by a non-recurring tax adjustment due to non-deductible foreign exchange losses, which occurred in the first quarter of 2020.

Significant items that impacted the effective tax rate in the second quarter of 2021 and 2020 included the following (percentages reflect the effect of each item as a percentage of income before income taxes):

Three months ended

June 30, Six months ended

2021 2020 2021 2020

(in thousands, except percentages)

Continuing operations (excluding discrete items) 13,251 29.5 % 16,262 34.0 % 24,365 29.5 % 23,081 34.0 %

Exercise of U.S.

stock options (14) — % — — % (156) (0.2) % — — %

Adjustments to prior period tax liabilities 22 — % 879 1.8 % (1,421) (1.7) % 767 1.1 %

Revaluation of deferred tax assets due to tax rate change 352 0.8 % — — % 352 0.4 % — — %

Provision for/resolution of tax audits and contingencies, net — — % (1,489) (3.1) % 278 0.3 % (1,733) (2.6) %

Write-off of net operating losses related to tax audit — — % — — % — — % 1,830 2.7 %

Tax effect of non-deductible foreign exchange loss on intercompany loan — — % (13) (0.1) % — — % 3,656 5.4 %

Changes in valuation allowance — — % 222 0.5 % — — % 222 0.4 %

Other adjustments (165) (0.3) % (497) (1.0) % 68 0.2 % (5) — %

Effective tax rate 13,446 30.0 % 15,364 32.1 % 23,486 28.5 % 27,818 41.0 %

The increase in the Q3 2021 income tax rate from continuing operations, excluding discrete items, was driven by an increase in losses in a foreign jurisdiction that were excluded in calculating the quarterly income tax provision.

The effective tax rate for the nine months ended September 30, 2020 was significantly affected by a non-recurring tax adjustment due to non-deductible foreign exchange losses, which occurred in the first quarter of 2020.

For more information on income tax, see Note 5 to the Consolidated Financial Statements.

1 unchanged sentence

Machine Clothing Segment

Machine Clothing accounted for 68% of our consolidated revenues during the six months of 2021.

Machine Clothing accounted for approximately 67% of our consolidated revenues during the nine months of 2021.

MC products are purchased primarily by manufacturers of paper and paperboard.

6 unchanged sentences

Review of Operations

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands, except percentages)

8 unchanged sentences

• Net sales increased by 11.1%.

• Changes in currency translation rates had the effect of increasing second-quarter 2021 sales by $5.3 million compared to the same period in 2020.

That currency translation effect was mainly due to stronger Euro and Chinese Yuan Renminbi in the second quarter of 2021, compared to 2020.

• Excluding the effect of changes in currency translation rates, Net sales in MC increased 0.8% compared to the second quarter of 2020, principally due to growth in sales for packaging grades and engineered fabrics, partially offset by declines in other grades.

Six month comparison

• Changes in currency translation rates had the effect of increasing third-quarter 2021 sales by $1.7 million compared to the same period in 2020.

That currency translation effect was mainly due to stronger Euro and Chinese Yuan Renminbi in the third quarter of 2021, compared to 2020.

• Excluding the effect of changes in currency translation rates, Net sales in MC increased 9.9% compared to the third quarter of 2020, principally due to growth in sales for packaging grades and engineered fabrics, partially offset by declines in other grades.

Nine month comparison

• Net sales increased by 7.8%.

• Changes in currency translation rates had the effect of increasing 2021 sales by $11.8 million compared to the same period in 2020.

That currency translation effect was principally due to stronger Euro and Chinese Yuan Renminbi in the first six months of 2021, compared to 2020.

• Excluding the effect of changes in currency translation rates, Net sales in MC increased 2.7% compared to 2020, as growth in sales for packaging grades and Engineered Fabrics partially offset the declines in other grades.

Three month comparison

The decrease in MC Gross profit margins was due to higher input and fixed costs, partially offset by improved absorption, in the second quarter of 2021.

Six month comparison

The decrease in MC Gross profit margins was due to an increase in production costs and lower cost absorption compared to the same period in 2020.

That currency translation effect was principally due to stronger Euro and Chinese Yuan Renminbi in the first nine months of 2021, compared to 2020.

• Excluding the effect of changes in currency translation rates, Net sales in MC increased 5.1% compared to 2020, due to growth in all major grades of product, led by engineered fabric and packaging grades.

Three and nine month comparison

MC gross profit margin was flat at 51.5% in each of the third quarters in 2021 and 2020.

For the nine months ended September 31, 2021, gross profit margin was lower compared to the same period in 2020, due to higher input and fixed costs, partially offset by improved absorption.

Operating Income

Three month comparison

The slight decrease in the second quarter of 2021 operating income, compared to the same period in 2020, was primarily due to a slight improvement in gross profit, partially offset by higher STG&R expenses.

Six month comparison

The increase in operating income in first half of 2021 was driven by higher gross profit, offset by higher STG&R expenses, compared to the same period in 2020.

Three and nine month comparison

The operating income improvement in the third quarter of 2021, compared to the same period in 2020, was primarily due to higher gross profit and lower STG&R expenses.

The increase in operating income in nine months ended September 30, 2021 was driven by higher gross profit, offset by higher STG&R expenses, compared to the same period in 2020.

Albany Engineered Composites Segment

2 unchanged sentences

AEC, through ASC, is the exclusive supplier of advanced composite fan blades and cases for this program under a long-term supply contract.

The LEAP engine is used on the Airbus A320neo and Boeing 737 MAX family of jets.

The LEAP engine is used on the Boeing 737 MAX, Airbus A320neo and COMAC aircraft family of jets.

Other significant AEC programs include components for the F-35, components for the CH-53K helicopter, fuselage frames for the Boeing 787, and the fan case for the GE9X engine.

Review of Operations

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands, except percentages)

6 unchanged sentences

Operating income 2,917 6,828 13,019 22,749

Three month comparison

The increase in Net sales was mainly due to higher sales in the LEAP and CH-53K programs, partially offset by a decline in sales in the Boeing 787 program.

Six month comparison

The decrease in Net sales was primarily due to lower sales in the Boeing 787 program.

Three and six month comparison

The decrease in Gross profit was principally due to smaller impact from changes in the estimated profitability of long-term contracts.

Three and nine month comparison

Third quarter 2021 net sales increased compared to third quarter 2020, mainly due to growth on LEAP and CH-53K programs, partially offset by a decline in sales for the Boeing 787 and F-35 platforms.

Net sales for the nine months ended September 30, 2021 decreased compared to those in the same period in 2020, primarily due to declines in sales for the Boeing 787 program, partially offset by growth on the CH-53K programs.

Three and nine month comparison

The decrease in gross profit for the third quarter in 2021 compared to the same period in 2020 was driven by a smaller impact from changes in the estimated profitability of long-term contracts, lower fixed cost absorption, and the effect of sharing with our customer base a portion of the AMJP grant received during the quarter.

For the year-to-date ended September 30, 2021, gross profit was lower compared to that for the same period in 2020, driven by unfavorable shift in program revenue mix.

Long-term contracts

AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement.

Revenue earned under these arrangements accounted for approximately 35 percent of segment revenue for each of the first six months of 2021 and 40 percent for the same period of 2020.

Revenue earned under these arrangements accounted for approximately 34 percent of segment revenue for year-to-date ended September 30, 2021 and 29 percent for the same period of 2020.

LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC aircraft.

In addition, AEC has long-term contracts in which the selling price is fixed.

In accounting for those contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach.

In accounting for those contracts, we estimate the profit margin expected at the completion of the contracts and recognize a pro-rata share of that profit during the course of the contracts using a cost-to-cost approach.

Changes in estimated contract profitability will affect revenue and gross profit when the change occurs, which could have a significant favorable or unfavorable effect on revenue and gross profit in any reporting period.

3 unchanged sentences

Operating Income

Three and six month comparison

The decrease in Operating income was driven by lower gross profit and higher STG&R expenses, offset by lower restructuring expenses.

Three and nine month comparison

Operating income was lower for the three and nine months ended September 30, 2021 compared to the same periods in 2020, primarily due to lower gross profit and higher STG&R expenses.

Liquidity and Capital Resources

Cash Flow Summary

Six months ended

Nine months ended

September 30,

(in thousands)

5 unchanged sentences

Net cash provided by/(used in) operating activities 148,499 83,693

Net cash used in investing activities (23,124) (22,017)

Net cash (used in)/ provided by investing activities (32,148) (31,475)

Net cash (used in)/provided by financing activities (69,339) (31,703)

Effect of exchange rate changes on cash and cash equivalents (2,111) (751)

(Decrease)/increase in cash and cash equivalents 12,014 8,497

Increase/(decrease) in cash and cash equivalents 44,901 19,764

Cash and cash equivalents at beginning of year 241,316 195,540

3 unchanged sentences

Operating activities

Cash flow provided by operating activities was $95.6 million in the first six months of 2021, compared to $44.0 million in the first six months of 2020.

This improvement was due to improved working capital cash flows in AEC and an increase in consolidated Net income.

Cash paid for income taxes was $22.8 million and $16.5 million for the first six months of 2021 and 2020, respectively.

The increase is primarily due to an increase in corporate income tax payments in Brazil, China and Switzerland related to prior year tax liabilities.

At June 30, 2021, we had $253.3 million of cash and cash equivalents, of which $215.2 million was held by subsidiaries outside of the United States.

Cash flow provided by operating activities was $148.5 million in the first nine months of 2021, compared to $83.7 million in the first nine months of 2020.

This improvement was due to improved working capital cash flows in AEC, primarily due to higher income from the LEAP program, and an increase in consolidated net income.

Cash paid for income taxes was $27.8 million and $21.9 million for the first nine months of 2021 and 2020, respectively.

The increase is primarily due to an increase in corporate income tax payments in Brazil, China and Switzerland related to prior year tax liabilities, partially offset by a decrease in corporate income tax payments in the United States due to an increase in prior year state overpayments.

At September 30, 2021, we had $286.2 million of cash and cash equivalents, of which $223.1 million was held by subsidiaries outside of the United States.

Investing and Financing Activities

Capital expenditures for the first six months were $23.1 million in 2021 and $22.0 million in 2020.

Capital expenditures for the first nine months were $32.1 million in 2021 and $31.5 million in 2020.

Net cash outflows from financing activities for the year-to-date ended September 30, 2021 were higher than those for the same period in 2020, primarily due to increased net principal payments on debt.

Dividends have been declared each quarter since the fourth quarter of 2001.

4 unchanged sentences

Our subsidiaries outside of the United States may also maintain working capital lines with local banks, but borrowings under such local facilities tend to be insignificant.

The majority of our cash balance at June 30, 2021 was held by non-U.S.

The majority of our cash balance at September 30, 2021 was held by non-U.S.

subsidiaries.

Based on cash on hand and credit facilities, we anticipate that the Company has sufficient capital resources to operate for the foreseeable future.

We were in compliance with all debt covenants as of June 30, 2021.

We were in compliance with all debt covenants as of September 30, 2021.

On October 27, 2020, we entered into a $700 million unsecured Four-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the prior amended and restated $685 million Five-Year Revolving Credit Facility Agreement, which we had entered into on November 7, 2017 (the “Prior Agreement”).

Under the Credit Agreement, $350 million of borrowings were outstanding as of June 30, 2021.

Under the Credit Agreement, $350 million of borrowings were outstanding as of September 30, 2021.

The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing.

At the time of the last borrowing on June 30, 2021, the spread was 1.625%.

At the time of the last borrowing on September 16, 2021, the spread was 1.625%.

The spread was based on a pricing grid, which ranged from 1.500% to 2.000%, based on our leverage ratio.

Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of June 30, 2021, we would have been able to borrow an additional $350 million under the Agreement.

Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of September 30, 2021, we would have been able to borrow an additional $350 million under the Agreement.

For more information, see Note 13 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

As of June 30, 2021, we have no off-balance sheet arrangements required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

The information set forth under Note 18 to the Consolidated Financial Statements.

As of September 30, 2021, we have no off-balance sheet arrangements required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K.

Non-GAAP Measures

7 unchanged sentences

EBITDA, or net income with interest, taxes, depreciation, and amortization added back, is a common indicator of financial performance used, among other things, to analyze and compare core profitability between companies and industries because it eliminates effects due to differences in financing, asset bases and taxes.

An understanding of the impact in a particular quarter of specific restructuring costs, former CEO termination costs, acquisition/integrations costs, currency revaluation, pension settlement/curtailment charges, inventory write-offs associated with discontinued businesses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect.

Restructuring expenses, while frequent in recent years, are reflective

of significant reductions in manufacturing capacity and associated headcount in response to shifting markets, and not of the profitability of the business going forward as restructured.

An understanding of the impact in a particular quarter of specific restructuring costs, former CEO termination costs, acquisition/integrations costs, currency revaluation, government grants, pension settlement/curtailment charges, inventory write-offs associated with discontinued businesses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect.

Restructuring expenses, while frequent in recent years, are reflective of significant reductions in manufacturing capacity and associated headcount in response to shifting markets, and not of the profitability of the business going forward as restructured.

Net sales, or percent changes in Net sales, excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S.

8 unchanged sentences

adding (or subtracting) revaluation losses (or gains);

subtracting income (net of associated costs) recognized related to government grants;

subtracting (or adding) gains (or losses) from the sale of buildings or investments;

10 unchanged sentences

The following tables show the calculation of EBITDA and Adjusted EBITDA:

Three months ended June 30, 2021

Three months ended September 30, 2021

(in thousands) Machine Clothing Albany Engineered

10 unchanged sentences

Foreign currency revaluation (gains)/losses (1,571) 31 472 (1,068)

AMJP grant — 963 (5,832) (4,869)

Acquisition/integration costs — 297 — 297

1 unchanged sentence

Adjusted EBITDA (non-GAAP) $ 59,161 $ 16,297 $ (15,227) $ 60,231

Three months ended June 30, 2020

Three months ended September 30, 2020

(in thousands) Machine Clothing Albany Engineered

13 unchanged sentences

Adjusted EBITDA (non-GAAP) $ 52,579 $ 19,465 $ (10,213) $ 61,831

Six months ended June 30, 2021

Nine months ended September 30, 2021

(in thousands) Machine Clothing Albany Engineered

10 unchanged sentences

Foreign currency revaluation (gains)/losses (156) 363 813 1,020

AMJP grant 963 (5,832) (4,869)

Acquisition/integration costs — 911 — 911

1 unchanged sentence

Adjusted EBITDA (non-GAAP) $ 177,040 $ 52,336 $ (39,055) $ 190,321

Six months ended June 30, 2020

Nine months ended September 30, 2020

(in thousands) Machine Clothing Albany Engineered

20 unchanged sentences

The following tables show the earnings per share effect of certain income and expense items:

Three months ended June 30, 2021

Three months ended September 30, 2021

(in thousands, except per share amounts) Pre tax

3 unchanged sentences

Foreign currency revaluation (gains)/losses (1,068) (314) (754) (0.02)

AMJP grant (4,869) (1,446) (3,423) (0.11)

Acquisition/integration costs 297 89 208 0.01

Three months ended June 30, 2020

Three months ended September 30, 2020

(in thousands, except per share amounts) Pre tax

4 unchanged sentences

Acquisition/integration costs 291 87 204 0.01

Six months ended June 30, 2021

Nine months ended September 30, 2021

(in thousands, except per share amounts) Pre tax

3 unchanged sentences

Foreign currency revaluation (gains)/losses 1,020 332 688 0.02

AMJP grant (4,869) (1,446) (3,423) (0.11)

Acquisition/integration costs 911 273 638 0.03

Six months ended June 30, 2020

Nine months ended September 30, 2020

(in thousands, except per share amounts) Pre tax

7 unchanged sentences

The following table provides a reconciliation of Earnings per share to Adjusted Earnings per share:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

Per share amounts (Basic)

4 unchanged sentences

Foreign currency revaluation (gains)/losses (0.02) 0.02 0.02 0.46

AMJP grant (0.11) — (0.11) —

Former CEO termination costs — — — 0.06

6 unchanged sentences

(in thousands)

June 30, 2021 March 31, 2021 December 31, 2020

September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020

Current maturities of long-term debt $ — $ — $ 2 $ 9

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis